2022 (1) TMI 938 - AT - Income Tax

Revision u/s 263 by CIT - exemption u/s.11 - assessee had not furnished confirmation from donors - difference between lack of enquiry and inadequate enquiry - HELD THAT - We find that in case if the ld. PCIT is of the opinion that the ld. AO had not made requisite enquiries, then he should have made the requisite enquiries and brought on record where the ld. AO had gone wrong. Admittedly, this has not been done in the instant case.See DELHI AIRPORT METRO EXPRESS PVT. LTD. 2017 (9) TMI 529 - DELHI HIGH COURT PCIT in the instant case had merely directed the ld. AO to make fishing and roving enquiries on the existing details already available in the assessment records by merely directing him to re-verify the same details. Hon ble Delhi High Court in the case of PCIT vs. Modicare Ltd., 2017 (9) TMI 1238 - DELHI HIGH COURT ; ITO vs. DG Housing Projects Ltd 2012 (3) TMI 227 - DELHI HIGH COURT ; DIT vs. Jyothi Foundation 2013 (7) TMI 483 - DELHI HIGH COURT had uniformly held that the exercise of jurisdiction u/s.263 of the Act by the ld. PCIT cannot be outsourced by the ld. PCIT to the ld. AO. In either case, there is a huge difference between lack of enquiry and inadequate enquiry . It is for the ld. AO to decide the extent of enquiry to be made as it is his satisfaction what is required under law. We find that the ld. PCIT had not invoked Explanation 2 to Section 263 in his entire order passed u/s.263 of the Act. Despite this fact, for academic reasons, we proceed to address the arguments of the ld. DR in this regard. The said explanation does not confer unfettered powers to the ld. PCIT to assume jurisdiction u/s.263 of the Act to revise every order of the ld. AO to re-examine the orders already examined during the course of assessment proceedings. Intention of the legislature could not have been to enable the ld. PCIT to find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The opinion of the ld. Commissioner referred to Section 263 of the Act has to be understood as legal , judicious opinion and not arbitrary opinion. Even in the case of Nirav Modi 2016 (11) TMI 1498 - SC ORDER categorically stated that the ld. PCIT should conduct enquiry on his own to find out whether there is any error in the details furnished by the assessee. - Decided in favour of assessee.

Issues Involved:
1. Justification of invoking revisionary jurisdiction under Section 263 of the Income Tax Act.
2. Delay in filing the appeal.
3. Verification and examination of donations and expenses by the Assessing Officer (AO).
4. Compliance with procedural requirements and adequacy of enquiries by the AO.

Issue-wise Detailed Analysis:

1. Justification of Invoking Revisionary Jurisdiction under Section 263 of the Income Tax Act:
The primary issue was whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking revisionary jurisdiction under Section 263 of the Act by treating the order passed by the AO as erroneous and prejudicial to the interest of the Revenue. The PCIT contended that the AO completed the assessment in a perfunctory manner without adequate verification or cross-checks, particularly concerning non-corpus and corpus donations and total expenditure claimed by the assessee. The Tribunal found that the AO had conducted due verification and examination of the details provided by the assessee, including donations and expenses. The Tribunal emphasized that once a possible view had been taken by the AO, it could not be subject to revision merely because the PCIT disagreed with that view. The Tribunal referenced several judicial precedents, including the Hon'ble Jurisdictional High Court's decisions in Gabriel India Ltd. and Nirav Modi, to support its conclusion that the AO's order was not erroneous.

2. Delay in Filing the Appeal:
The appeal was initially time-barred by 200 days. However, the Tribunal noted that the delay was due to the Covid-19 pandemic and subsequent lockdowns. The Government of India had issued notifications extending the time limit for filing appeals. In light of these notifications and the circumstances, the Tribunal condoned the delay, admitting the appeal for adjudication.

3. Verification and Examination of Donations and Expenses by the AO:
The PCIT's grievance included the lack of verification of donations and expenses by the AO. The Tribunal found that the AO had indeed verified the details of donations and expenses. The assessee had provided comprehensive details, including the names, addresses, PANs of donors, and the mode of receipt of donations. The AO had also examined the expenses incurred on the objects of the trust and establishment expenses. The Tribunal noted that the AO had raised several queries during the assessment proceedings, which were duly replied to by the assessee. The AO's acceptance of the return of income after due examination was considered a possible view, and thus, the order could not be termed as erroneous.

4. Compliance with Procedural Requirements and Adequacy of Enquiries by the AO:
The Tribunal observed that the AO had conducted adequate enquiries and verified the necessary details during the assessment proceedings. The PCIT's direction to the AO to re-verify the same details was seen as an attempt to make fishing and roving enquiries, which is not permissible. The Tribunal cited the Hon'ble Delhi High Court's decision in PCIT vs. Delhi Airport Metro Express Pvt. Ltd., which emphasized that for invoking jurisdiction under Section 263, the PCIT must conduct an inquiry and establish that the assessment order is unsustainable in law. The Tribunal concluded that the PCIT had not conducted such an inquiry and had merely directed the AO to re-verify the details, which was not justified.

Conclusion:
The Tribunal quashed the order passed by the PCIT under Section 263 of the Act, holding that the AO had conducted due verification and examination of the details provided by the assessee. The appeal of the assessee was allowed, and the Tribunal emphasized that the PCIT had not established how the AO's order was erroneous or prejudicial to the interest of the Revenue. The Tribunal also highlighted the importance of the AO's satisfaction and the extent of enquiries conducted during the assessment proceedings.

← Previous Next →